NEW YORK (Reuters) - A former New York Mercantile Exchange board member pleaded guilty to defrauding customers and tampering with evidence on Tuesday in exchange for serving 5 months in prison and paying $850,000 in fines and penalties.

In addition to Steven Karvellas, the former NYMEX Holdings Inc (NYSE:NMX - News) director, three others involved in fraudulent trading on the commodities exchange also pleaded guilty, the Manhattan District Attorney's Office said. Three more were arrested and their cases are expected to go to trial, the office said.

Karvellas, who also is a member of the Chicago Mercantile Exchange, owned both Steven J. Karvellas and Co, a natural gas trading company, and Commercial Brokerage Corp, according to court papers. He could have been sentenced to four years in prison on each of the two charges.

Karvellas, his crisp suit as gray as his hair, stood before New York State Supreme Court Justice Daniel Fitzgerald and quietly said the word "Guilty," acknowledging that he had delayed customers' orders to buy or sell natural gas contracts and stolen their trading profits.

Between September 2002 and May 2003, while he was serving as chairman of the exchange's Adjudication and Compliance Review Committee, Karvellas delayed the allocation of customer orders and "if the market went up, he would take that order for himself," said Manhattan District Attorney Robert Morgenthau, comparing Karvellas with "a fox in the chicken house."

By either not filling the orders or filling them at less favorable prices, Karvellas "was able to engage in risk-free investing and deprived the customer of the profits it deserved," according to the plea agreement he signed.

A second floor trader, Thomas Maloney, who worked for his own eponymous firm in the crude pit, also pleaded guilty to charges of violating the Martin Act for trading ahead of customer orders. He is expected to be sentenced to probation and fined $75,000 as part of his plea deal.

Both men were also barred from the industry.

Two others, Brian Keane, a former floor clerk who worked for Powers Futures Trading Inc, and Ryan Tremblay, a former floor clerk who worked for a number of companies a number have also pleaded guilty for the same crime. Keane is expected to be sentenced to four months in jail; Tremblay is expected to get probation.

The three men who are expected to go to trial include two former floor clerks -- John Kozlik, who worked for Maloney Trading, and Al Demicoli, a clerk for New York Energy and Metals Executions Inc -- and former NYMEX employee Alvin Perez.

Morgenthau said there was not a conspiracy among the seven men, but "they were acting on their own."

Gregory Mocek, the director of enforcement for the Commodity Futures Trading Commission, told reporters: "These individuals were able to rig the system and call 'bingo' after the scheme was over."

The head of NYMEX, James Newsome, said in a statement: "Today's action should serve as an unmistakable notice to our market participants that NYMEX will not hesitate to work with law enforcement authorities, or take whatever steps are otherwise necessary, to protect the integrity of our markets."

Morgenthau's office declined to estimate the total amount of money the men stole. Karvellas, who will also have to serve five years' probation under the agreement, was ordered to surrender on September 9 to begin his 5-month sentence.